An empirical estimation of the demand functions for U.S. rice

This study was concerned primarily with the distribution of U.S. rice and its by-products domestically and abroad. A simultaneous equation demand model was developed and estimated using the three-stage least squares (3SLS) technique, while a multiple regression supply model was formulated and estimated employing ordinary least squares (OLS) technique. Annual time-series data, obtained from secondary sources and covering the period (1950-78), were utilized in the estimations of both these models. The price and income elasticities or flexibilities were determined from the supply and demand results which were evaluated at the mean values of the selected periods (1950-71, 1950-78 and 1972-78). The reduced form coefficients were also derived from the 3SLS estimates of the demand model in order to examine the impacts of a given change in a predetermined variable on each of the endogenous prices and quantities of U.S. rice.

The results of the demand model indicated that corn was a substitute for milled rice used for food while barley was a substitute for brewer rice. Wheat bran was also found to compete with rice millfeed. The farm price of rice was affected by the quantity of rough rice milled; the quantity of milled rice used for food influenced the retail price of rice; and the quantity of rice millfeed was found to affect the price of the rice bran. The U.S. export price of rice influenced the quantities of U.S. rice exports demanded in Asia and Africa, but not in Europe and the Western Hemisphere. Except for the Western Hemisphere, the regional per capita incomes were important shifters of the regional demand for U.S. rice exports. The U.S. rice exports faced a considerable competition from rice exports of other rice exporting countries.

The demand for U.S. rice exports in Asia and Africa were found to be inelastic compared to the domestic demand for U.S. rice when they are evaluated at the mean values of the period (1972-78). Thus, the total revenue from U.S. rice exports in Asia and Africa could be increased by increasing the U.S. export price of rice; and the total revenue from the sale of U.S. rice domestically could be raised by reducing the domestic prices of U.S. rice.

According to the impact multiplier analysis, any policy geared to stabilize the farm price of rice and income by regulating the U.S. rice production seemed to be ineffective. Any changes in the U.S. export price of rice and the volume of U.S. rice exports, resulting from a change in a domestic factor, did not seem to influence the international rice trade. On the contrary, any changes in the volume of world rice exports were indicated to affect the quantities and the prices of U.S. rice. Also, a given change in the world per capita income was found to increase the demand for world rice exports as well as the demand for U.S. rice exports in Asia. Finally, the price of U.S. rice was indicated to be positively related with the world price of rice.

The U.S. rice supply was influenced by the last year's ratio of the farm price of rice to the support price of rice, the previous year's U.S. rice acreage harvested and the lagged government rough rice ending stocks. The elasticity of U.S. rice acreage harvested with respect to the previous year's ratio of the farm price of rice and the support price of rice was found to be inelastic.